Saturday, June 12, 2004

Like All Things, It Depends: An Example of the Influence of Attitude

Is it just me or do people think that economists are magical creatures, capable of predicting the future and handing out pots of gold to any that follow their instructions?

My brother, Jason, is visiting this weekend for a neighborhood wedding and yesterday he was kind enough to take me out to lunch. On the way to the restaurant, we passed a local McDonald’s an I noticed the drive-thru line stretched at least ten cars long. I passed on to my brother that I’m glad we’re not going there and had an idea why. McDonald’s recently began offering free music downloads. I asked him if he was sure that people are responding that strongly to offer. “Well David,” he asked me, “you’re the economist; do these special offers work?”

This is why economists are known for answering questions the frustrating “It depends:” it’s always the best answer to such over simplistic questions. I blame the media’s and public’s willingness to embrace what Paul Krugman calls “policy entrepreneurs,” known as economists that abandon core economic realities in favor of telling politicians what they want to hear.

But Jason’s question opens the door for another question: how much does perception and attitude influence deals like these. Not more than three or four years ago, we were celebrating the miracle of free music from Napster. Now such programs are harder to find and the sheer volume and opportunity won’t reach the miracle that was Napster anytime soon. Like most people, I miss those times of free music; resorting to buying music online instead of simply downloading seems too…tragic to engage in. Even getting free downloads for a normally priced service doesn’t perk my interest. I know I’m not alone and I’m betting McDonald’s offer isn’t working as well as they wished. The only way to know for sure is by how much longer they’ll keep the offer around and if they’ll ever bring it back. Personally, think McDonald’s is always that crowded around lunch time.

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